And they're also facing two major long-term problems:
China's rise in industrial sophistication and increasing labor
costs combined with falling export prices.

In a recent note to clients, Deutsche Bank senior economist
Juliana Lee outlined how these two "existential threats" have
squeezed Korean manufacturing in between "a rock and a hard
place."

Lee notes that China has progressed forward in industrial
sophistication over the last few years. In fact, the technology
gap between China and Korea, which measures how long it would
take for China to catch up with Korea's tech, has narrowed to 1.4
years in 2014 from 2.7 years in 2008, according to figures cited
by Lee.

Meanwhile, Korea's share of global exports remained around 3% in
2014, slightly up from 2.7% in 2007, while China's surged to
11.7% from 8% in the same years, according to figures cited by
Lee.

And as for the high-tech goods, Korea's gain in global export
share has remained around 4% since 2007, while China's spiked to
17.2% from 12% in the same time period.

"While, as the world's factory, China's rise in global export
share is not surprising, its gain in high-skilled and
tech-intensive goods' export poses and existential threat to its
neighbors' manufacturing industry, including Korea's," wrote Lee.

Korea's export prices have been declining precipitously,
falling 8% from 2007 to 2014. Somewhat notably, this decline
precedes the commodities price drop last year — meaning it's not
something that everyone can just blame on lower oil.